SSE, the energy company, has set aside a record amount of money to compensate
its customers for mis-selling. We explain who may be entitled to claim – and
how to do it.

Thousands of SSE customers are entitled to a share of a £5m compensation fund set up by the energy giant today.

The company, which has 10 million customers, has been fined £10.5m by Ofgem, the industry regulator, for lying to customers and for "prolonged and extensive" mis-selling.

Ofgem has no powers to force companies to offer compensation but SSE, formerly known as Scottish & Southern Energy, has set up a £5m fund to reimburse those who may have been a victim of its practices.

It has not said how many people may be eligible to claim but the pot is far larger than those set aside before. Ofgem has undertaken 14 similar investigations in recent years, which have led to "£6m of redress payments".

The SSE breaches were between 2009 and 2012. Anyone who suffered at the hands of these practices – outlined in detail below – should make a claim by calling the fund’s dedicated phone line, 0845 0707 388.

SSEsaid it believes all customers "who may have been financially disadvantaged as a result of the breaches" should have already received a letter already but added that other customers were welcome to contact its phone line.

Sometimes it may not be possible to know if you were a mis-selling victim. For example, SSE told some customers they would save money when they were switched to a more expensive contract. Ofgem gives the example of one customer at a rival company with an annual bill of £1,600 for gas and electricity who was told that with SSE she would pay only £1,423; she ended up paying £1,734.

You may also receive compensation if you were:

• told other suppliers were charging more than they really were;

• not given adequate information on the price of energy with SSE, exit fees, unit rates and standing charges.

Ofgem has no power to force companies to offer compensation for mis-selling. At present, it can only penalise with fines, with the money flowing straight to the Treasury. The regulator will be handed powers in the Energy Bill, which could be written into legislation this year, that will allow it to force energy companies to offer a certain amount of compensation.

The regulator also hopes to introduce a new shake-up of the industry this year, under its Retail Market Reforms, to simplify energy tariffs. Currently, there are more than 900 tariffs available but Ofgem's new rules will restrict this to four tariffs per company.

It also has other investigations still open, into npower, Scottish Power and E.On. EDF Energy, another of the big suppliers, agreed a £4.5m deal with the regulator last March. This included a fine of £1 with the majority of the money – £3.5m – going to 70,000 “vulnerable” customers and £1m going to fund an energy advice centre. Payments of £50 were made to those on its Warm Homes Discount tariff.

Clare Francis, editor-in-chief of Moneysupermarket.com, said: “On behalf of the nation’s long-suffering bill payers, it is good to see the regulator clamp down on mis-selling tactics that are so often complained about. The energy firms have taken measures to change their sales practices in recent years but Ofgem’s intervention is a clear signal that unfair practices simply aren’t acceptable to customers.

“SSE has set aside a £5m compensation pot for customers who had switched as a result of inaccurate information or mis-selling and had lost out financially, but energy customers still need to take action where necessary.

"For any customers unhappy with their energy supplier, my advice is to complain directly to the provider in the first instance. If the company fails to respond within eight weeks, or the response is unsuitable, the next step is to take the complaint to the energy ombudsman.”

If you were subjected to any of the practices below by SSE sales staff, you may be entitled to compensation

• Customers were told that other suppliers were making “all sorts of false promises” by putting their prices up. They also told customers that other suppliers’ price increases were higher than they actually were.

• Customers who switched to SSE were only told how much they would pay for their energy with SSE after they had signed up.

In one example cited by Ofgem, SSE staff told consumers that they would be put on a “preferred customer tariff ... with no standing charge if you want”.

However, those same customers were also charged higher rates for a proportion of their energy bills instead of a standing charge. In another example, Ofgem said:

Mrs X had her energy supplied by one of SSE’s competitors. She was paying an annual bill of £1,600 for electricity and gas. In April 2010 she was visited by an SSE sales agent. The sales agent said Mrs X would only pay £1,423 with SSE. That was not true. In fact she was going to pay £1,734 per annum. As a result Mrs X thought that she was going to save £177 but in fact she was put on a tariff that was £134 more expensive than her previous deal.

• SSE staff were accused of using "misleading scripts by both external telesales agents and doorstep sales agents". Here's one example used by a staff member in the north of England:

What I’m here to do today is show you a government thing called deregulation which results in your energy prices being lowered by doing nothing at all.

Ofgem said:

This is inaccurate and misleading as there is no automatic reduction in energy prices owing to “a government thing called deregulation” or by the customer “doing nothing at all”.

• SSE failed to take into account all relevant information when estimating a customer’s annual energy consumption, resulting in many customers' direct debits being set too low. In one example, Ofgem said:

Ms Y had her energy supplied by another supplier. In January 2011 she was visited by an SSE sales agent and, based on a monthly direct debit amount of £81, she decided to switch to SSE. However, on paper it was estimated that she would pay £1,072 for the first year’s charges.

She is likely to have ended up being £100 in debt at the end of the year because the direct debit had been set too low.

• Staff also used misleading statements during telesales calls:

In December 2010 Mrs Z terminated her supply contract with SSE to switch to another supplier. She was called by an SSE sales agent who asked her why she had switched. Mrs Z said that she had done so because SSE was increasing its gas prices by 9pc. The sales agent countered that SSE were still the most competitive and that the other supplier had increased their prices by “14pc combined”. This was misleading because the other supplier had increased their electricity and gas prices by 7pc each, which is 7pc combined.

• There were also flaws in SSE's auditing process, which was conducted by local managers who received commission on sales. Ofgem said:

However, the auditing of both venue and doorstep marketing activities over the relevant period (i.e. from October 2009 to July 2011) was inadequate: in relation to doorstep sales, the main auditing was carried out by local managers who received commission on sales and therefore had a financial interest in not reporting misbehaviour and so were not sufficiently independent; and in relation to venue sales the “mystery shopper” system did not address the adequacy of the sales activity by reference to the relevant SLCs but rather focused mainly on compliance with dress-code and other elements of working in the high street stores at which the venue sales took place.